stocks

A comparison of ETF’s and individual stocks

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Investing in ETFs (Exchange-Traded Funds) versus individual stocks depends on your investment strategy, risk tolerance, time commitment, and financial goals. Here’s a comparison of both: Advantages of Investing in ETFs: Diversification: ETFs offer instant diversification by holding a basket of stocks, bonds, or other assets. This reduces risk because your investment is spread across multiple companies or sectors. With individual stocks, you’re exposed to the performance of just one company, which increases the risk. Lower Risk: Because of diversification, ETFs …

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Characteristics of a risky stock

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Out of the asset classes of cash, bonds, property, and equities, the latter is considered by most to be the riskiest investment. However, investors can identify stocks to match their risk profile by evaluating the level of risk by looking at the debt, market cap, profitability, age, and sector of that company. Large company debt Companies which have large debt numbers on their balance sheet are riskier than companies that have lower debt levels. To calculate the debt ratio, you …

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What are interest rate sensitive stocks?

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It is beneficial to know what stocks are affected by different macroeconomic circumstances. This is so portfolios can be managed to take advantage of the change in environment. Last week we discussed defensive and cyclical stocks, this week we discuss interest rate sensitive sectors. Definition Interest rate sensitive stocks are stocks which react to interest rate movements more than the others in the market. A discounted cash flow is used to calculate a present value of the stock or to …

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What is a divestment?

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Companies can use excess cash to acquire new companies but they can sell a subsidiary to obtain cash and add value back to the parent company. In this article we discuss about what you need to know about divestment. What is a divestment? A divestment occurs when a company sells off a subsidiary or some of its assets. It is essentially the opposite of an acquisition. The company is looking to optimise the value of the parent company which may …

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How do you know a stock is expensive? Part 1

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Often in the financial media, a talking head or analyst will dismiss a stock as being “too expensive”. Yet often these expensive stocks are the ones that produce the best returns over time. So what does it actually mean when someone states that a stock is too expensive? The P/E ratio One of the methods investors use to evaluate a stock price is to calculate its price to earnings (P/E) ratio. This ratio compares the stock price against its per-share …

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